NYC Buyer Guide:

Purchasing a property in New York City is a unique experience, and our NYC Buyer Guide is designed to assist you through the process. It provides valuable insights into the differences between condominiums and co-operative apartments, outlining key considerations for each.

Condominiums

Owning a condominium is akin to owning any other type of home, but with a distinctive feature. In a condominium, a purchaser not only owns the apartment but also holds a percentage of the common areas within the building. The process involves taking title by deed, which is duly recorded in the County Clerk's office.

Condominium boards commonly require a down payment, often set at a minimum of 10%. Condominium owners are responsible for monthly "common charges," representing their share of the general upkeep of the building. This includes expenses such as employee salaries, fuel, insurance, management fees, and more. Owners also bear the responsibility of paying the real estate taxes allocated to their specific apartment. One notable aspect of condominium ownership is the absence of a board interview for purchasers. A distinct advantage of condominium ownership is the flexibility to sell or lease the apartment to any buyer or renter at any time, with the only potential limitation being the condominium board's Right of First Refusal. However, it's essential to note that the closing costs associated with purchasing a condominium are typically higher compared to those for a co-operative.

Cooperatives

In a co-op (cooperative), the cooperative apartment corporation assumes ownership of the entire building, encompassing all individual apartments. The corporation issues shares of its stock in addition to a proprietary lease, with allocations to each apartment based on size and features.

When an individual purchases a co-op, they are essentially acquiring shares in the apartment corporation. Typically, the corporation holds a mortgage on the entire building, while each purchaser may secure a separate loan for the purchase of their specific apartment. The apartment corporation establishes the permissible amount of financing for apartments in the building, ranging from all-cash transactions (no financing allowed) to up to 80% financing.

In a co-op arrangement, purchasers are required to pay monthly maintenance charges. These charges are determined based on their share of the underlying mortgage and real estate taxes for the entire building, along with expenses for general upkeep, salaries, fuel, and other operational costs. A portion of the maintenance charge that comprises mortgage interest is generally tax-deductible. A significant distinction between co-op and condominium ownership lies in the approval process. In a co-op, ownership is subject to the approval of a Board of Directors, which is elected from among the shareholders. The Board is responsible for managing the business of the Apartment Corporation and overseeing the building's management, often with the assistance of a Managing Agent. The Board may impose limitations on the financing amount for apartments, as well as restrictions on subletting, among other considerations. Importantly, the sale of a co- op cannot proceed without the Board's approval of the prospective buyer.

For a co-op closing, the purchaser must obtain a loan commitment, and finally, approval of the sale by the co-op's Board of Directors after a personal interview. Your agent will be able to give you an estimate of closing time based on his/her experience dealing with the managing agent and board of the building you have chosen. The purchase process in New York City is a complex series of events. It is difficult to estimate how long the process will take, from acceptance of the bid to closing. Under normal circumstances, a closing typically takes place 60-90 days after a contract has been signed.

The Offer to Purchase

After identifying the property you wish to purchase, your agent will assist you in negotiating towards an accepted offer. Your offer should encompass key details such as the purchase price, the percentage of the price you intend to finance (if applicable), inclusions or exclusions of any personal property, and your preferred closing date. It's crucial to bear in mind that until a contract is signed by and delivered to both parties, a deal has not been finalized. Clear communication and a comprehensive understanding of the terms are essential during the negotiation process to ensure a smooth transition to the contractual phase.

Hiring an Attorney

Navigating New York City's complex real estate laws requires careful consideration, and your agent can play a crucial role in assisting you with the hiring of a local real estate attorney. The attorney, as well as your agent, will embark on a "due diligence" review of the underlying documents for a co-op or condo. This preliminary assessment aims to identify any potential legal or financial issues with the building where the desired apartment is located, all before you commit to signing a contract.

For a condominium, this scrutiny will involve a comprehensive review of the offering plan, all amendments, by-laws, house rules, financial statements, and the title report. In the case of a co-op, your team will examine the offering plan and its amendments, by-laws, house rules, financial statements, and the proprietary lease. Additionally, the attorney will delve into the corporate minutes of the cooperative, typically located at the managing agent's office. This meticulous review of minutes provides valuable insights into existing or potential issues within the building and helps determine if significant expenses are anticipated for the co-op corporation and its shareholders. This thorough examination by your seasoned team ensures that you are well-informed about the legal and financial aspects of the property before proceeding with the contract.

The Contract of Sale

Upon the acceptance of an offer, the seller's real estate attorney takes the lead in preparing the contract of sale, which is then forwarded to your real estate attorney. At this stage, it's crucial to communicate any specific terms or circumstances related to the transaction to your attorney, who will make necessary changes or additions to the contract to safeguard your interests.

Once the contract is finalized, your lawyer should schedule a meeting with you to inform you of your rights and obligations under the contract terms. You will be required to sign three or four copies of the contract and provide a personal check payable to the seller's attorney, typically equal to 10% of the purchase price, representing the down payment. These signed contracts and the down payment check are then delivered to the seller's attorney.

The seller's attorney will securely hold your down payment in a trust or escrow account until the closing date. Following this, the seller countersigns the contract, and their attorney acknowledges receipt of the down payment. Two fully executed copies are returned to your attorney. Your attorney will provide you with one original contract and share a copy with your lender or mortgage broker. Upon receiving the signed contract, it's essential to promptly submit your final mortgage application if you haven't already done so. This meticulous process ensures that all parties involved are well-informed and that the necessary steps are taken to proceed toward closing.

Obtaining a Loan

Before embarking on your apartment search, your agent can facilitate your connection with a mortgage broker or lender to assess your qualifications and help you obtain the desired loan. There are two primary avenues for securing a loan:

Direct Application Through a Lender (e.g., Bank):

You have the option to apply for a loan directly through a lender, such as a bank. This involves working directly with the financial institution to navigate the loan application process.

Engaging the Services of a Mortgage Broker:

Alternatively, you can choose to use the services of a mortgage broker. A mortgage broker acts as an intermediary between you and institutional lenders, negotiating, originating, and processing residential real estate loans on your behalf. The broker facilitates the loan application process and works to secure a suitable loan from an institutional lender.

The choice between applying directly through a lender or utilizing a mortgage broker depends on your preferences and specific needs. Your agent can provide guidance and support throughout this process, helping you make informed decisions as you navigate the complexities of obtaining a mortgage for your prospective home.

The Mortgage Broker

Residential mortgage brokers in New York are subject to regulation by the New York State Banking Department. Their role involves negotiating, originating, and processing residential real estate loans on behalf of borrowers. It's important to note that a mortgage broker does not directly lend money to prospective purchasers; instead, they arrange loans through institutional lenders on behalf of the borrower.

When a lender considers making a loan, several factors come into play. These typically include your credit rating, income, assets, liabilities, the loan amount, and the appraised value of the apartment. To verify this information, the lender will require you to complete a loan application, detailing your assets and liabilities. They will also confirm your employment and income, request a credit report from a credit reporting agency, and conduct an appraisal of the apartment.

In the case of obtaining a loan for a condo or co-op apartment, the mortgage broker or lender will ensure that the building is in good financial condition. It's advisable to obtain the building's financial statements for the last two years when applying for a loan.

The process of obtaining a loan commitment typically takes three to six weeks. A loan commitment is the lender's written agreement to provide the funds needed to purchase the apartment. Once the loan commitment is issued, it is essential for your attorney to review it. If everything is in order, you should sign the commitment and return it to the lender or mortgage broker as instructed. This marks a critical step in the loan approval process.

Board Approval (Co-ops Only)

In the case of a co-op sale, the transaction is contingent upon the approval of the co-op board, unless the purchase is directly from the sponsor. The contractual agreement stipulates that you must promptly submit your application for board approval after the issuance of a financing commitment, if applicable. Cooperation with the co-op board is essential, and you are required to provide any documentation requested to facilitate the approval of your purchase.

Each co-op board establishes specific financial requirements for prospective purchasers within their building. Additionally, co-op boards impose financial limitations on the amount of money a potential buyer can borrow to complete the transaction. For instance, many co-ops may permit a purchaser to finance only 75-80% of the purchase price or even less. These financial considerations play a crucial role in the approval process and are integral to the overall conditions of purchasing a co-op property.

The Co-op Closing

The co-op closing is a significant event attended by key parties involved in the transaction. The participants typically include you (the buyer), your attorney, the seller, the seller's attorney, the lender's attorney, a representative from the managing agent's office, and the real estate agents handling the transaction.

During the closing, you will engage in several crucial activities:

1. Signing Documents to Secure Interest:

You will first sign all the necessary documents to secure your interest in the co- op apartment. These documents may include a Security Agreement, Promissory

Note, Stock Power, and Assignment of Lease.

2. Conveyance of Co-op Apartment Documents:

Following the initial signings, you will proceed to sign and receive all the documents required to officially convey ownership of the co-op apartment to you. This typically involves the transfer of stock certificates, the proprietary lease, and consent documents.

3. Exchange of Checks for Purchase Price and Adjustments:

Checks representing the balance of the purchase price and any necessary adjustments are exchanged. This marks the financial settlement of the transaction.

4. Receiving the Keys:

Once all documents are signed, and financial matters are settled, you will receive the keys to your new co-op apartment. This moment signifies the completion of the closing process and the official transfer of ownership.

The co-op closing is a culmination of the intricate steps taken throughout the purchasing process, and its successful completion ensures that you are now the rightful owner of the co-op property.

Board Approval - Condominiums

In the case of a condominium sale, the transaction is contingent upon the approval of the Board of Managers' Waiver of the Right of First Refusal, unless you are purchasing directly from the developer. The terms outlined in your purchase contract stipulate that you are required to promptly submit your application for board approval after the issuance of a financing commitment, if applicable. It is crucial to cooperate with the condo board's requests and provide any necessary documentation to facilitate the issuance of the waiver.

The Board of Managers' Waiver of the Right of First Refusal is a process where the condominium board has the option to waive its right to purchase the unit before it is offered to an external buyer. This step is integral to the approval process for the purchaser and involves a thorough review by the condo board.

Your prompt submission of the application, cooperation with the board, and provision of required documentation are essential to the successful issuance of the waiver and the overall approval of your purchase. This process ensures that the condominium board has the necessary information to make an informed decision regarding your eligibility to purchase the condominium unit.

The Condo Closing

The condominium closing is a significant event that typically takes place either at the office of the lender's attorney or, in the case of a developer sale, at the developer's attorney's office. Key participants in the closing include you (the buyer), your attorney, the seller, the seller's attorney, the lender's attorney, the title company closer, and the real estate agents involved.

During the closing process, several important steps are taken:

1. Signing Documents for First Mortgage:

You will first sign all the necessary documents to secure a first mortgage on the condominium apartment. These documents typically include a Mortgage and a Promissory Note.

2. Conveyance of Condo Apartment Documents:

Following the mortgage-related signings, you will proceed to sign and receive all documents required to officially convey ownership of the condominium apartment to you. This often includes a deed, title report, and unit power of attorney.

3. Exchange of Checks for Purchase Price and Adjustments:

Checks representing the balance of the purchase price and any necessary adjustments are exchanged. This marks the financial settlement of the transaction.

4. Payment of Taxes and Title Charges:

During the closing, you will be responsible for paying all appropriate taxes and title charges associated with the purchase.

5. Receiving the Keys:

Once all documents are signed, financial matters are settled, and necessary payments are made, you will receive the keys to your new condominium apartment. This signifies the completion of the closing process and the official transfer of ownership.

The condominium closing is a crucial step in finalizing the purchase, and its successful completion ensures that you are now the rightful owner of the condominium unit.

Closing Cost Estimates, Condominium Apartments & Townhouses